Photo/Illutration The headquarters of the ruling Liberal Democratic Party in Tokyo's Nagatacho district (Koichi Ueda)

The government and ruling coalition are further pushing back a planned tax hike needed to pay for a huge defense buildup by at least a year to possibly 2026.

In late 2022, the administration of Prime Minister Fumio Kishida approved a five-year defense buildup costing 43 trillion yen ($299 billion).

At around the same time, the Kishida Cabinet also agreed to implement increases over a number of years of the personal income tax, corporate tax and cigarette tax to pay for the increased defense spending. 

But the start was left vague, with wording about “an appropriate time after 2024.”

Kishida said in late October that no such tax increase would be implemented in 2024 because of a planned income tax cut that same year.

“The only options left are to raise taxes from 2025 for three years or from 2026 for two years,” said Yoichi Miyazawa, panel chair of the ruling Liberal Democratic Party’s Research Commission on the Tax System, at a Nov. 30 meeting of its executives.

However, the government and ruling coalition are now leaning toward not raising taxes in 2025 either, according to several sources.

Ruling coalition lawmakers discussing changes in the tax system are working on a plan to put in writing that the tax increases will be made from 2026.

Views were expressed that no decision on when the tax increases would be implemented need be made this year at another meeting on Nov. 30 involving Kishida, LDP Vice President Taro Aso, Secretary-General Toshimitsu Motegi and three other top officials.

Members of the LDP’s junior coalition partner, Komeito, have also said that implementing a tax increase in 2024 when a tax cut was also planned would only add to confusion among the public.

(This article was written by Naoki Matsuyama and Kohei Morioka.)

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